Just had the worst advice from my mortgage company

SHAMON

I'm in the process of being made redundant from work. There's obviously a lot going on with that currently but this post is to highlight some terrible advice I received off of my mortgage company.

• We're not in arrears with anything and have a good credit rating.
• I phoned Lloyds to inform them that it's likely I'll be made redundant over the next couple of weeks.
• The idea I had was to scope out a mortgage holiday for 2-3 months. It would just mean the money that I receive will last a bit longer and takes the pressure off of finding a job. I've currently been offered about 2.5 months salary net so thought this was a sensible idea.
• Went through quite a few questions with an advisor who then had to speak to another dept. When he came back on he said that they can't help with the holiday, but that they do have some other options.
• The options he suggested was basically that if we do a budget they may suggest skipping some mortgage payments.
• So my mortgage company were suggesting that I should go into arrears on my mortgage. This was their advice.

To say I was shocked is an understatement. They were saying they can't help me until I am in much more financial problems. I said this phone call is to avoid this kind of thing. I explained how disappointed I was with their advice and he suggested that I make a complaint, which I did. So they'll help me once I am in financial crisis having mounted up pay day loans etc. But won't help me avoid this thing happening. Bonkers,

I had in my mind that the last thing you stop paying is the mortgage. It's an asset and you don't want to lose it.

Not really what sort of advice I'm looking for here but I just felt like I should share this information.

user1977

Aren't you both talking about the same thing? A "mortgage holiday" is just going into pre-arranged arrears of payments, surely?

Annisele

If the bank effectively said it wouldn't agree a payment holiday unless you did a budget, then I think it probably acted fairly. Banks don't have to agree payment holidays, and it sounds as though you're not currently in financial difficulties. It's entirely reasonable for you to be worried about financial difficulties in the near future (good luck with on the job front btw) but from the bank's perspective you haven't actually been made redundant yet, and maybe you won't be.

As an aside, I'm not a fan of the term "payment holiday". It sounds like a jolly happy thing with no downsides, but I prefer the term "payment deferral". Overall they make your mortgage more expensive, and sometimes they have an effect on your credit file and/or your future ability to borrow. See this from Experian (one of the credit reference agencies) for more detail.

SHAMON

Thanks for the replies.
I understand the consequences of a mortgage holiday. Effectively you'll end up paying more as the interest isn't being paid.
It was made very clear to the bank that I thought it would happen and how would I go about it if I needed to.
Just feels like a very strange piece of advice. Go into arrears instead of a pre agreed mortgage holiday.

Windofchange

SHAMON said:

Thanks for the replies.
I understand the consequences of a mortgage holiday. Effectively you'll end up paying more as the interest isn't being paid.
It was made very clear to the bank that I thought it would happen and how would I go about it if I needed to.
Just feels like a very strange piece of advice. Go into arrears instead of a pre agreed mortgage holiday.

But they are one and the same thing are they not? A mortgage holiday is an agreement to go into arrears, skipping some mortgage payments is going into arrears. As I understand it when you come off a mortgage holiday your monthly payments will increase as you’ll be making up the deficit and this is perhaps why the bank don’t want you doing this as your affordability might be stretched? Put yourself in their shoes, you owe a significant amount of money I’m assuming, and you’ve just told them you are being made redundant. Why would they want to enter you into something that will increase your monthly payments in the hope you find a job? 

ACG

They are not recommending anything, they are telling you what options they have for you. Its up to you to decide if that works or not. 

Even an agreed payment holiday would show as arrears on your credit report. The amount of times I see people who were told they could have a payment holiday but then it shows as arrears and they were never told it would is staggering. 

silvercar

Use the 2.5 months salary, presumably tax free if it is a redundancy payment, to cover your outgoings for the next few months.  At the same time keep applying for new jobs and hope that you get something before the money runs out.

dunstonh

So my mortgage company were suggesting that I should go into arrears on my mortgage. This was their advice.

Their advice does not seem wrong at all.  It appears you have a misunderstanding of what a "holiday" is.   It is arrears.   You phoned them to ask to go into arrears.  They said no but would consider it with further information.

I had in my mind that the last thing you stop paying is the mortgage. It's an asset and you don't want to lose it.But you still phoned them to stop paying the mortgage for a few months.

So they'll help me once I am in financial crisis having mounted up pay day loans etc. But won't help me avoid this thing happening. Bonkers,You may not have difficultly paying the mortgage.  A job may be found quickly.  So, your request to go into arrears may not be necessary.   The bank is saying wait a bit, work out your budget and come back to them and if necessary, they may consider your request to go into arrears.